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Revealed: £45bn ‘hole’ in Budget
Nicholas Cecil23.04.09
A £45 billion black hole in Alistair Darling's Budget spells more tax rises, independent experts said today.
The respected Institute for Fiscal Studies said the unexplained funding gap would have to be filled by either tax increases or spending cuts.
The Government is projecting to fill a £90 billion deficit by 2017-18 with a range of measures but IFS economists say they will only recoup half that sum.
Families would have to pay an average of £1,430 per household in higher taxes to make the books balance, says the IFS.
Alternatively, Mr Darling could embark on a programme of steep spending cuts, a move that he has appeared to rule out as impossible without hitting vital public services.
IFS economist Carl Emmerson said: “There is a gap between the specific measures [the Government has announced] and the size of the gap they think they need to fill. That equates to £1,430 per family.”
An IFS analysis concluded that details of the Budget and pre-Budget report in the gap they think they need to fill. That equates to £1,430 per family.”
An IFS analysis concluded that details of the Budget and pre-Budget report in November of the Government's fiscal plans meant it would need to raise taxes or cut public spending to the tune of £2,840 a year for every family.
It also warned that it would take until February 2032 before national debt falls below 40 per cent of national income, the level the Prime Minister vowed not to breach under his fiscal rules.
The institute stressed that Whitehall departments faced savage cuts of 2.3 per cent a year from 2014. It also raised serious doubts over whether Mr Darling could raise the £7 billion he is seeking from stinging the rich.
Mr Darling is introducing a new 50 per cent top rate of tax among a string of fiscal measures to rake in more money. Growth in public expenditure is also being cut from 1.1 per cent a year to just 0.7 per cent. Ministers have vowed to make billions of pounds in savings. However, fears remain that frontline services, including schools and hospitals, will be badly hit. IFS director Robert Chote said: “Taking the PBR and Budget forecasts together, the Treasury's assessment of the fiscal damage wrought by the current economic and financial crisis is breathtaking.
“Put simply, the Treasury forecasts now imply that the crisis has dealt a permanent hit to the Exchequer costing around 6.5 per cent of national income or £90 billion a year in today's money — from a combination of lost tax revenues and higher social security costs.”
This would be due to a five per cent fall in the long-term productive potential of the economy as well as a declining financial sector, house prices and share prices, he added.
He stressed the “underlying problem” that the Treasury's detailed forecasts had revealed would “require two full Parliaments of mounting austerity to repair”.
The Treasury challenged the IFS figures, stressing it was odd to claim that lower spending due to efficiency savings were a “cost” to families.
Reader views (13)
This will, I'm convinced, go down as the `Bermuda Triangle' budget.
- Ted, London
so mr darling states the 50% top tax rate is only temporary....yes, because it will go up to 60%, then 70%...in fact, taking into account VAT at 15%, NI Contributions at 11.5% and the new top tax of 50%, essentially evry £ earned will result in 23.5p in your pocket - what an incentive to try and earn more! If you add in the removal of the personal allowance, the first £6500 over the £150k will mean that you pay over £7000 in tax for earning £6500!
- Gary, amersham
What is a constant form of annoyance to me, and I suspect the rest of the country is that it takes until the following day for the true impact of the proposals to become apparent.
Obviously I don't know 'Marianne (Uk National And Tax-Payer!), SW France' but I think I like her.
- J R J, Glen Vine
"There's a hole in our Budge-ket Dear Gordon, theres a hole in our Budge-ket, a hole, a very large one!"
"Well mend it Dear Alistair, Dear Alistair, Dear Alistair!"
"With what shall I mend it, Dear Gordon, Dear Gordon, with what?"
"With some Quatitative Easment, Dear Alistair, Dear Alistair!"
"But there's a hole in our Budge-ket, Dear Gordon, a very, very, very large bleeding 'ole, and there nothing to mend it with, Dear Gordon!"
"Oh, well, then - Blame it on Maggie Dear Alistair, Dear Alistair... blame it on Maggie!"
"Yes, we blame it all on Maggie, on Maggie........!!"
- Uncle Vanya, East Anglia Area UK
What I find difficult to believe is that anyone in the country still has enough faith in this load of double dealing to vote for them. I don`t believe a single word any member of the government says anymore. They are only in it for their own ends and the rest of us can go fly a kite. I never ever believed a Labour goverment would be so incapable of governing the country.
- Brian Gare, Norfolk Gorleston
In the midst of life we are in debt!
- Graham, Ilford Essex
Brown's Bankrupted Britain...but then we knew that this started during his tenure as Chancellor. Why do you think Mandy's back as an unelected member of Govt in our "democracy"? Certainly not for his history of competent achievements either in UK or Brussels....It's to spin away the continuing failures of this bunch of transparent fools.
- A Britt, Brussels, Belgium
I have never known a more corrupt party than lie-bour.
You have really messed it up this time,call that general election now
- Martin, sheffield
No one doubts that Darlings figures are wrong. Every forecast he has made since this crisis began has been wrong. Remember at the start he claimed that '..the UK is better placed than it's European partners to weather the downturn..'. He, along with Brown, is the only person to still believe that!. He now forecasts that the UK economy will pick up in the second half of 2009. Again only he and Brown believe that. Q. Where will the extra taxes come from to plug the £49Bn shortfall. Ans. The same old favourites increased taxes on alcohol, petrol, car tax and cigarettes. Who suffers the most from these increases?. Certainly not the wealthy or the well off, but the poor old working man and his family, the very people who have suffered the most during this Government inflicted financial crises.
- Pete, South of England
Cancelling MP expenses with immediate effect will probably help fill some of it.
- Marianne (Uk National And Tax-Payer!), SW France
This government will be remembered for fiddling while the UK burns.
They have fiddled the inflation figures and the "basket", SATs tests, NHS results, all of Browns budgets, the G20 claims, Honours, the WMD report, expenses and once again, Darling and his Treasury goons are trying to fiddle the latest borrowing figures.
Well, we won't be fooled again. We are on to them.
At the June elections and at the next General Election, the nation will be playing a different tune - Goodbyeeee, Goodbyeee........we won't be shedding a tear in our eyeeeee - for Blair, Brown, the Millibland bruvs, Darling, Blears, Harperson, Mandelson, Balls and the rest of the sorry crew.
- Ricky, Hackney, London
Of course, Dizzy Darling speaks with a forked tongue. No mean feat that - rattling off reams of spin and waffle through a forked tongue.
Gormless Brown (the PRUDENT one) and Dizzy Darling will really feel the wrath of the British at the next General Election.
God help the children of today and their children.
The UK is hopelessly bankrupt.
- Reuben Camara, Morecambe/Lancaster
The country will thank you at the polls Mr Darling and Mr Brown.
- Dave Davies, Basingstoke
